UPDATE: AIG Exit From AIA Complete After $6.5 Billion Share Sale

--AIG sells final stake in Asian insurer AIA Group

--AIG raises $6.5 billion from stake sale

--Share sale is second-largest in Asia this year, according to Dealogic

(Revises throughout, adds details and background)

 
   By Prudence Ho and Fiona Law 
 

HONG KONG--American International Group Inc. (AIG) has sold its final stake in Asian insurer AIA Group Ltd. (1299.HK), raising around US$6.5 billion and ending a relationship that stretched back to Shanghai in 1919.

For fast-growing AIA, which operates in 16 Asian markets, the sale marks a new beginning as a Hong Kong-listed company that is fully owned by the public.

"This latest divestment of the remaining holding is noteworthy in AIA's history since it marks the end of AIG's shareholder interest in AIA," AIA Chief Executive Mark Tucker said in a statement Tuesday.

AIG has shed assets, including AIA, in recent years to repay loans from the U.S. government, which effectively took over the company in a $182 billion bailout at the height of the 2008 financial crisis. AIG paid off its debt to the U.S. Treasury last week.

AIG sold around two-thirds of AIA in an initial public offering in Hong Kong in October 2010, raising US$20.5 billion. It also raised a total of US$8 billion in two block sales this year. Including this week's block sale, it has now raised US$35 billion from selling AIA.

In March 2010, the U.K.'s Prudential offered US$35.5 billion in cash and stock for all of AIA, then cut the offer to US$30.4 billion. AIA rejected it.

AIG priced the shares this week near the top end of the range, indicating strong demand. It sold 1.65 billion shares at HK$30.30 each, AIA said. That makes it the region's second-biggest share sale this year, after Japan Airlines Co.'s US$8.5 billion initial public offering in September, according to Dealogic.

The block sale began Monday and ended overnight. The shares were sold at a 4.3% discount to AIA's closing price of HK$31.65 Friday, but well above AIA's IPO price of HK$19.68 a share.

The latest sale will remove the overhang from AIA's shares, said Mizuho Securities Asia Ltd., which maintains a "buy" rating on them due to expectations of strong premium growth and profitability.

AIA shares have climbed 27.8% this year, reflecting strong growth and new exposure to Malaysia. In October, AIA agreed to buy ING Groep NV's Malaysian life insurer in a $1.73 billion deal that was approved Monday.

In July, AIA reported that net profits grew 10% on year in the six months ended June 30. Its business value, a key measure of profitability, climbed 28% during the same period.

At 0400 GMT, AIA's Hong Kong-listed shares were down 2.0% to HK$31.00 after resuming trading early Tuesday. Trading in its shares was suspended Monday.

AIG, once a leading seller of property-casualty and life insurance around the globe, ran into financial trouble primarily as a result of complex financial instruments sold to other financial firms. That led to the U.S. rescue.

Last week, it said it was selling up to 90% of an airplane-leasing business to a Chinese consortium.

The sale of AIA shares comes just days after the U.S. Treasury sold the last of its AIG shares for $7.6 billion, raising its profit from the bailout to $22.7 billion. It still holds warrants to buy 2.7 million shares.

AIG isn't done with Asia. It said last month that it plans to form a joint venture with the life-insurance unit of People's Insurance Co. (Group) of China Ltd., China's largest property and casualty insurer.

It also bought US$500 million worth of shares in PICC's initial public offering last month.

Deutsche Bank AG and Goldman Sachs Group Inc. are among banks handling the share sale, along with Citigroup, J.P. Morgan Chase & Co. and Morgan Stanley, people familiar with the situation said earlier.

Write to Prudence Ho at [e-mail] and Fiona Law at [e-mail]

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